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Biotech Stock Mailbag: Transcept Pharma

Returning to reality, investors are bidding up Spectrum shares in anticipation of the company's second-quarter earnings in the middle of August. Shrotriya has already said publicly to expect "record" revenue for the June quarter, fueled once again by Fusilev colon cancer drug sales because generic leucovorin -- Fusilev's competition -- is still in short supply in the U.S.

None of this should be a surprise to anyone. The leucovorin shortage is only just now letting up with Teva (TEVA) and Bedford Labs beginning to replenish supplies. This benefited Spectrum with Fusilev largely the only option in the colon cancer market for the second quarter, just like it was in the first quarter.

Spectrum reported first-quarter Fusilev sales of $34.6 million and total revenue of $44 million. There's no reason to think second-quarter sales will be lower. If anything, Spectrum needs to record a sequential gain in Fusilev sales and total revenue for the second quarter.

I fully expect Spectrum to "pre-announce" second-quarter earnings later this month or in early August, just like the company did in the first quarter. I'm not the only one anticipating this transparent stock-promotion scheme, judging by the recent ramp in the stock price. [By the way, "real" earnings pre-announcements are issued right before or at the quarter's end, not two or three weeks later. Spectrum operates from a different playbook.]

The current analysts' consensus for the second quarter has Spectrum earning 15 cents a share on total revenue of $37.25 million, which is lower than first-quarter revenue, thereby totally ignoring Shrotriya's statement about expecting "record" revenues in the second quarter.

Lazy analysts.

Investors better hope Spectrum does as well in the second quarter as Shrotriya has promised because the company faces significant headwinds once leucovorin is readily available, giving U.S. doctors a cheaper and equally effective alternative to Fusilev.

More tweets. @gregtucker21 asks, "PFS events happening later is a good sign for cabo and EXEL, yes?"

Yes, maybe. No, maybe.

On Wednesday, Exelixis (EXEL) said it expected a three-month delay in reporting top-line results from a phase III study of cabozantinib in medullary thyroid cancer. Delaying the announcement of results until September-October is necessary because progression-free survival events are not coming as fast as previously expected, Exelixis said.

Optimists will assume that the delay in PFS events is being caused by cabozantinib patients performing better than expected, thereby increasing the odds that the study comes out positive.
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